Department of Accounting and Finance Hawassa

University

Chapter Three: Recording common

Transactions of FGE
3.1. Cash Transfers

Cash transfers are cash movements among government units. Cash

transfers may be made in the form of currency, checks or direct cash
movement between bank accounts.

Cash Transfers: Between Bank Accounts at Public Bodies and MOFED

Cash is transferred from MOFED bank accounts to bank accounts of
public Bodies, and cash is transferred from bank accounts of public
Bodies to MOFED bank accounts. These transfers are done in the form of
Checks, and Direct bank transfers evidenced by bank advices.

Cash transfers from MOFED bank accounts to bank accounts of public

Bodies are recorded:
 By MOFED, as a debit to the appropriate transfer code and a credit
to 4105, and
 By the public Body, as debit cash at Bank 4103 and a credit to the
appropriate transfer code.

Example: Assume a public Body receives from MOFED a transfer of Birr

100,000 for Capital expenditure and also further assume that you are an
accountant in both the PB and MOFED

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Numbe
r
Dr Cr Dr Cr
1 Cash transfer -- 4004 100,0 100,00
to PB 00 0

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer from - 4004 100,000 100,000
MOFED

At MOFED, although a transfer authorization to one bank account may

include funds for more than one BI, the entire transfer is one. Therefore,
only one entry should be made for the total of the transfer in the
Transaction Register maintained at MOFED. The BI code for the entry
should be the BI code of the Reporting Entity.

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University

If the bank charges a service charge for the transfer:

 The Service charge should be recorded as a debit to account code
6256.
 Cash at bank 4103 should be debited for the amount of cash
actually received.
 The appropriate transfer account code should be credited for the
gross amount of the transfer.

Example: MOFED transfers Birr 100,000 to a public body for capital

expenditure. The bank deducts 2000 birr as a service charge; the public
body receives Birr 98,000.
Transaction Register of MOFED:
N Description type Account Others Cash at bank
o of Number 4105
budget
Dr Cr Dr Cr
1 Cash transfer to 4004 100,00 100,00
PB 0 0

Transaction Register of Public Body:

No Description type Account Others Cash at bank
of Number 4103
budget
Dr Cr Dr Cr
1 Bank Service 02 6256 2000
Charge
Cash transfer 4004 100,000 98,000
from MOFED

Cash Transfers: Between Bank Accounts at Public Bodies and MOFED:

From Public Bodies to MOFED at federal level
Cash transfers from bank accounts of public Bodies to MOFED bank
accounts are recorded:
 By MOFED, as a debit to Cash at Bank4105 and a credit to the
appropriate transfer code, and
 By the Public Body, as a debit to the appropriate transfer code and
a credit to Cash at Bank 4103.

Example: A Public Body collected revenue of Birr 60,000. The cash is

transferred to MOFED.

Transaction Register of MOFED

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Cash transfer from - 4009 60,000 60,000
PB

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Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to - 4009 60,000 60,000
MOFED

Some public Bodies deposit cash directly into a MOFED bank account
when revenue is collected. If revenue is deposited directly to a MOFED
bank account, the entry in the Transaction Register of the public Body is
a debit to the appropriate transfer account code and a credit to the
appropriate revenue account code.

Cash Transfers: Between MOFED safe and Public Bodies

According to MOFED and DSA Project manual, January 2002, the
Treasury Department at MOFED maintains a safe. Public Bodies can
withdraw a maximum of Birr 2,000 from the safe with appropriate
approval. MOFED-CAD records the Cash payment Voucher as a transfer
in the Federal Transaction Register. The public Body records the Cash
payment Voucher as a transfer in its Transaction Register.

Example: A Public Body provides Ge/Be/We 11/2 to Treasury

Department for payment of Birr 1,000 from the safe at MOFED.

Transaction Register of MOFED:

No Description TB Account Others Cash in Safe
Number 4101
Dr Cr Dr Cr
1 Cash transfer - 4002 1,000 1,000

Transaction Register of public Body:

No Description TB Account Others Cash in Safe
Number 4101
Dr Cr Dr Cr
1 Cash transfer - 4002 1,000 1,000

Cash Transfers: Between Public Bodies

Cash may be transferred from a bank account of one public body to a
bank account of another public body. These transfers are done in the
form of: Checks, and Direct bank transfers evidenced by bank advices.
Cash transfers from a bank account of one public Body to a bank account
of another public Body are recorded:
 By the public Body sending the cash, as a debit to transfer code
4008 and a credit to cash at Bank 4103,and
 By the public Body receiving the cash, as a debit Cash at Bank
4103 and a credit to transfer code 4008.

Example: Public Body #1 transfers Birr 90,000 to public Body #2.

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University
Transaction Register of public Body #1:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to PB - 4008 90,000 90,000
#2

Transaction Register of public Body #2:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to PB - 4008 90,000 90,000
#1

Cash Transfers: Within Public Body

In the same Manual prepared by MOFED&DSDA Project, it is indicated
that some public Bodies maintain branch bank accounts. The public Body
may transfer cash from one bank account to another bank account of its
branch. These transfers are done in form of: Checks, and Direct bank
transfers evidenced by bank advices. Cash transfers within a public body
from bank Account #1 to bank Account #2 are recorded:
 By the accounting unit for bank Account #1, as a debit to transfer
code (transfer between financial bureau and wereda finance/
district finance/ office) 4011 and a credit to cash at Bank 4103, and
 By the accounting unit for bank account #2, as a debit cash at
bank 4103 and a credit to transfer code 4011.

After both transactions are recorded in the consolidated general ledger of

the public body, the net effect of the internal transfer is zero (the balance
in transfer code 4011 is zero).

For control purposes, if the public body transfers to more than one
branch bank account, a subsidiary ledger should be maintained by the
main bank account. Each branch bank account that receives or sends a
transfer using account code 4011 should have its own subsidiary ledger
card under transfer code 4011. This will aid consolidation in the general
ledger of the public body and improve cash control within the public
Body.

Example: Bank Account #1 transfers Birr 80,000 to Bank Account #2

Transaction Register of Bank Account #1:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to BA - 4011 80,000 80,000
#2

Transaction Register of Bank Account #2:

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Department of Accounting and Finance Hawassa
University
No Description TB Account Other Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer BA - 4011 80,000 80,000
#1

3.2 Non - Cash Transfers

Non-Cash transfers are used to record a transfer when cash does not
actually move. The authorization for a non-cash transfer usually is a letter
from MOFED.

Example: Assume Ministry of Health (MOH) requests MOFED to pay

customs duty amounting to Birr 250,000 on its behalf to the customs
Authority (CA) for motor vehicles from its capital expenditure budget and
further assuming that you are the accountant in these institutions.
Solution:
Transaction Register of MOFED:
No Description TB Account Others Cash at
Number bank 4105
Dr Cr Dr Cr
1 Transfer to MOH - - 4054 250,000
Customs duty
Transfer from CA- - 4055 250,000
Customs duty

Transaction Register of Ministry of Health:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Purchase of motor 02 6311 250,000
vehicles
Transfer from - 4054 250,000
MOFED-Customs
duty

Transaction Register of Customs Authority:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Transfer to MOFED - 4055 250,000
Duty on Motor - 1301 250,000
vehicles

3.3. Receipt of Revenue /Assistance/ Loan

Public Bodies are authorized to collect revenue on behalf of the FGE. In
addition, Public Bodies may receive funds for assistance and loan directly
from donors and lenders. Receipts are collected in the form of currency,

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checks and direct bank transfers. Receipts are recorded as a debit to cash
at Bank 4103 and a credit to the appropriate revenue /assistance/ loan
account code.

Example: Assume you are the accountant of Ministry of foreign affairs

and that you collected birr 10,000 in fees for visas.

Transaction Register of Ministry of Foreign Affairs :

No Description TB Account Others Cash at Bank
Number 4103
Dr Cr Dr Cr
1 Revenue - 1411 10,000 10,000
Transfer of collections Directly to MOFED
In some public bodies, revenue collectors make deposits directly to a
MOFED bank account. It is important that the collector adequately
identify the public body for which the deposit is made.
 When MOFED receives the bank advice, MOFED records a debit to
cash in Bank 4105 and a credit to transfer account code 4009.
 When the public body receives the Receipt voucher from revenue
collectors, the public body records a debit to transfer account code
4009 and a credit to the appropriate revenue account code.

Example: MOFED receives a deposit from Internal Revenue for Birr

40,000. The deposit is from the collection of agricultural income tax.
Transaction Register of MOFED:
No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer from IR - 4009 40,000 40,000

Transaction Register of Internal Revenue:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to MoFED 4009 40,000
Agricultural income tax 1107 40,000

3.4. Cash Expenditures

Public Bodies are authorized to make cash expenditures from funds
budgeted for that purpose. Cash expenditures are made using currency,
checks and direct bank transfers.

Cash Expenditures: Payments to Regions/Transfer Recipients by

MOFED
Payments by MOFED to regions and transfer recipients (Functional
classification 4000 - 4099, are budgeted expenditures of the federal
government. When MOFED makes these payments, MOFED records the
expenditure in the federal Transaction Register.

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Example: Assume a subsidy payment of Birr 300,000 is made to a region
by MOFED where you are an accountant.

Transaction Register of MOFED

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Region subsidy 6411 300,000 300,000

Cash Expenditures: Check Payments by Accountants

Only accountants are allowed to make payments using checks.

Example: Assume that an accountant pays by check an amount of Birr

50,000 for office supplies.

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Office supplies paid 6212 50,000 50,000
in cash

Cash Expenditures: Cash payment By MOFED on Behalf of Public

Bodies
MOFED can make cash payments on behalf of a public body. The
transaction begins with a letter from the public Body to MOFED
requesting that the payment be made on its behalf. Cash payments made
by MOFED on behalf of Public Bodies are recorded:
 By MOFED, as a debit to the appropriate transfer code and a credit
to Cash at Bank 4105, and
 By the public Body, as a debit to the appropriate expenditure code
and a credit to the appropriate transfer code.

Example: The Ministry of Health (MOH) requests MOFED to pay for a

motor vehicle on its behalf amounting to Birr 280,000 from its capital
expenditure budget.

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer to - 4004 280,000 280,000
MOH

Transaction Register of Ministry of Health:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Purchase of motor 02 6311 280,000

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University
vehicles
Transfer from MOFED - 4004 280,000

Cash Expenditures: Letter of Credit

A Public Body may need to open a Letter of Credit as part of an
international purchase agreement. Opening a letter of credit means
putting cash in a restricted bank account dedicated to payment of the
purchase price when appropriate conditions are met. There are two
processes for opening a letter of credit:
 If the letter of credit is for Birr 50,000 or less, the public body can
open the letter of credit.
 If the letter of credit is for more than Birr 50,000, the public body
must request that MOFED open the letter of credit.

Cash Expenditures: Letter of Credit: Opened by Public Body

When a public Body opens a Letter of Credit, cash is paid, using a Bank
payment Voucher, from the bank account of the public Body to a
restricted bank account at the national bank of Ethiopia. In the
transaction register for the public body's bank account, expenditure is
recorded. The public body uses another transaction register for the
restricted bank account. The public body must combine the monthly
report of the restricted account with the monthly report of the regular
bank account for reporting to MOFED.

Example: The ministry of Health (MOH) establishes a restricted bank

account to open a letter of credit for the purchase of medical supplies
valued at birr 30,000.

Transaction Register - Regular Bank Account of Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Purchase of medical 02 6214 30,000 30,000
supplies

Transaction Register - Restricted Bank Account of Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Letter of credit - 5500 30,000 30,000
#xxxx

Cash Expenditures: Letter of Credit: Opened by MOFED on behalf of

Public Body
A Public Body requests that MOFED open a letter of credit on its behalf.
MOFED: Transfers cash to restricted bank account at national bank of
Ethiopia on behalf of the public body, Records a cash transfer to the
public body, and notifies the public body of the transaction.
The Public Body: Records the cash transfer as expenditure in the
transaction Register for the public Body's bank account, and Records the

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University
Letter of Credit in another Transaction Register for the restricted bank
account.

Example: The Ministry of Health (MOH) requests MOFED to open a letter

of credit on its behalf amounting to Birr 700,000 for motor vehicles from
its capital expenditure budget.

Transaction Register of MOFED:

No Description TB Account Other Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer to - 4054 700,000 700,000
MOH

Transaction Register of regular bank account MOH:

No Description TB Account Other Cash at
Number bank 4103
Dr Cr Dr Cr
1 Purchase of Motor 02 6311 700,000
vehicle
2 Transfer from - 4054 700,000
MOFED

Transaction Register - Restricted Bank Account of Ministry of

Health:
N Description TB Accou Other Cash at bank
o nt 4103
Numbe
r
Dr Cr Dr Cr
1 Letter of Credit #xxxx - 5531 700,0 700,0
00 00

Cash Expenditures: Cash Payment by Public Body to Region

Occasionally, public Bodies make cash payments to regions. Some of the
funds are intended for sector bureaus in the regions. The sector line
ministry acts as a treasury department by distributing the cash to the
region sector bureaus directly.

All payments to the regions from the federal level are budgeted as part of
the region's subsidy. When a public body pays cash to regions, the
payment is part of the regions subsidy. The public body should record
the payment as a subsidy payment.

Example: The ministry of Health (MOH) sends Birr 53,000 to a region as

part of a sector development plan.

Transaction Register - Ministry of Health:

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Department of Accounting and Finance Hawassa
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No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Region - 6411 53,000 53,000
Subsidy

Cash Expenditures: Cash Payment Requiring Withholding of Tax

The tax authority requires that a tax must be paid on specified purchases
over a certain amount. The purchaser collects the tax as a withholding
from the purchase price. The threshold amount and the tax rate may vary
each year. The tax is paid to the appropriate authority, federal or regional
government, depending on the location of the supplier.

The supplier can reclaim the withholding tax. The tax authority creates a
special tax receipt that should be issued to the supplier when the tax is
withheld. This receipt is not an accounting document and should not be
referenced in any accounting record. If a regional tax authority has not
issued a special tax receipt, the federal special tax receipt should be
used . The withholding tax does not reduce the cost of the goods to the
public body. The withholding tax is a reduction to the payment made to
the supplier. The payment is made to the appropriated government
instead. When a purchase is made that requires the withholding of tax, a
bank payment voucher is prepared that indicates, in the space provided
for accounting use only.

The expenditure account code with a debit for the full purchase price. If
the tax is federal, withholding tax revenue code 1103 or 1104 (depending
of whether the supplier is an individual or a corporation) with a credit for
the amount of the tax. The only exception is if the payment is made with
retained revenue. If retained revenue is the source of funds for the
payment, payable account code 5028 is credited for the amount of the tax.
If the tax is regional, payable account code 5026 with a credit for the
amount of the tax. Cash at bank 4103 with a credit for the actual amount
paid to the supplier.

Cash Expenditures: Cash Payment Requiring Withholding of Tax:

Federal Tax
When federal tax is withheld from a purchase, the tax is recorded as
revenue immediately subsequently; an amount of cash equal to the tax
is transferred to MOFED.

Example: A public body buys office supplies from a corporation for Birr
200,000 from its recurrent expenditure budget - Birr 198,000 relates to
the cost of the office supplies and Birr 2,000 is the withholding tax.

Transaction #1: Payment effected to supplier

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr

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University
1 Office supplies 01 6212 200,000
Withholding tax 1104 2,000 198,000
revenue

Transaction #2: Transfer to MOFED

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Transfer to MOFED 4009 2,000 2,000

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer from 4009 2,000 2,000
Public body

Cash Expenditures: Cash Payment Requiring Withholding of Tax:

Regional Tax
When regional tax is withheld from a purchase, the tax is recorded as a
payable to the region. Subsequently, an amount of cash equal to the tax is
transferred to MOFED. MOFED pays the tax amount to the region. A
subsidiary ledger should be maintained for payable to region account code
5026 if tax is collected for more than one region. Each region should be a
separate account in the subsidiary ledger.

Example: A public body buys office supplies for Birr 200,000 from its
recurrent expenditure budget - Birr 198,000 relates to the cost of the
office supplies and Birr 2,000 is the regional withholding tax.

Transaction #1: Payment effected to supplier

Transaction Register of public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Office Supplies 01 6212 200,000
Tax payable to 5026 2,000 198,000
Region

Transaction #2: Transfer to MOFED

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Payable to 5026 2,000 2,000

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University
MOFED
Transaction Register of MOFED:
No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Tax payable to 5026 2,000 2,000
region

Transaction #3: MOFED pays tax to region

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
2 Payable to region 5026 2,000 2,000

Cash Expenditures: Construction Projects

The long-term construction projects involve complicated financial
arrangements. Several accounting entries are necessary over the life of the
project. In general, when a construction contract is signed, there are
several steps in the payment process. At each stem, an accounting entry
is required. The general steps are:
 Payment of an advance: Usually the contract calls for an advance
payment to the contractor. The advance payment is proportionately
deducted from future payments to the contractor.
 Progress payments based on payment certificates: Usually the
contract calls for partial payment of the total contract price as the
construction reaches agreed-upon percentages of completion. A
payment certificate is evidence that the agreed-upon completion
percentage is reached.
 Payment of the retention: Usually a percentage of the payment is
retained and not paid until final acceptance of the completed
construction.

Example: Assume the following:

A contract is signed to construct a building for 2,000,000 Birr. Terms of
contract are:
Initial advance of 20% = 400,000 Birr
Advance adjusted proportionately with each payment certificate
approval.
Retention of 10% withheld from each payment certificate & paid
after final approval.
Steps in payment are:
Payment of 20% advance.
Payment certificate when 40% complete.
Payment certificate when 80% complete.
Payment certificate when 100% complete.
Transaction #1: payment of 20% advance:
Accountant prepares a check for 400,000 Birr.
Transaction Register of public Body:

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Department of Accounting and Finance Hawassa
University
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Advance to 4251 400,000 400,000
contractor

Transaction #2: payment certificate when 40% complete.

Accountant prepares a check for 560,000 Birr as follows:
800,000 payment certificate request
160,000 adjustments to advance
80,000 retention.
Accountant prepares payment Voucher as follows:
Debit to 6323 for 800,000
Credit to 4251 for 160,000
Credit to 5061 for 80,000
Credit to 4103 for 560,000

Transaction Register of public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Construction – 02 6323 800,000
Building
Advance to 4251 160,000
contractor
Retention on 5061 80,000 560,000
contract

Transaction #3: payment certificate when 80% complete.

Accountant Preparesa check for 560,000 Birr as follows:
800,000 payment certificate request
160,000 adjustment to advance
80,000 retention
Accountant prepares payment voucher as follows:
Debit to 6323 for 800,000
Credit to 4251 for 160,000
Credit to 5061 for 80,000
Credit to 4103 for 560,000
Transaction Register of public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
4 Construction – 02 6323 800,000
Building
Advance to 4251 160,000
contractor
Retention on 5061 80,000 560,000

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University
Contract

Transaction #4: payment certificate when 100% complete.

Accountant prepares check for 280,000 Birr as follows:
400,000 payment certificate request
80,000 adjustments to advance
40,000 retention
Accountant prepares payment Voucher as follows:
Debit to 6323 for 400,000
Credit to 4251 for 80,000
Credit to 5061 for 40,000
Credit to 4103 for 280,000
Transaction Register of public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
4 Construction – 02 6323 400,000
Building
Advance to 4251 80,000
contractor
Retention on 5061 40,000 280,000
Contract

Transaction #5: Payment of retention after final approval of project:

Accountant prepares a check for 200,000 Birr.
Accountant prepares payment voucher for 200,000 Birr:
Debit to 5061 & Credit to 4103

Transaction Register of public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
5 Retention on 5061 200,000 200,000
contract

3.5. Salary
Public Bodies pay salaries to employees every month. This section
describes the accounting for:
Payment of salary
Unpaid salary
Unearned salary

Payment of Salary
The salary payment transaction is complex. The public body must record
the gross salary amount and government's portion of pension as
expenditure to maintain budget control, but only the net salary amount is
transferred to, and paid by the public body.

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After the salary request is approved, MOFED transfers the net salary
amount to the public body and the total pension amount, employee and
government contribution, to the pension Authority. Although cash for
pension is transferred directly to the pension authority, MOFED records
the cash transfer as if the cash was transferred to the public body. At
MOFED, two transfer entries to the public body are recorded in the
transaction register:
 A debit to transfer coder 4001 and a credit to cash at bank 4105 for
the net salary amount.
 A debit to transfer coder 4001 and a credit to cash at bank 4105 for
the total pension amount sent to the pension Authority.

Each transfer amount is reported to the public Body separately on

Ge/Be/We 12/1 with Model 33. When the public Body receives Ge/Be/We
12/1, the public Body prepares:
 A receipt voucher for the total amount of cash received. The entry is
a debit to cash at bank 4103, a debit to pension payable account
code 5003 for the amount of cash paid to the pension Authority and
a credit to transfer code 4001.
 A journal voucher to record salary and pension expense. The entry
is a debit to salary expense code 6111 (6112 for military) for the
gross salary amount, a debit to pension expense code 6131 (6132
for military) for the government’s portion of the pension
contribution, a credit to salary payable code 5004 for the net salary
amount, a credit to pension payable code 5003 for the amount of
each paid to the pension Authority, a credit to income tax code
1101 for tax withheld from salary, and a credit to any other
withholding amounts.

Example: Assume the Ministry of Agriculture (MOA) requests salary for

the month of July 2001 with the following details and also assume that
you are the accountant in MOA and MOFED.
Gross salary 40,000
Deduction: salary advance 1,200
Pension expense - 6% 2,400
Penalty for absenteeism 500
Employee pension - 4% 1,600
Net Salary payable 32,700
Income tax 4,000

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer to 4001 32,700 32,700
PB
2 Transfer to 4001 4,000 4,000
PB

Transaction Register of MOA:

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Department of Accounting and Finance Hawassa
University
N Description TB Account Others Cash at
o Number bank 4103
Dr Cr Dr Cr
1 Transfer from 4001 36,700
MOFED
Pension payable 5003 4,000 32,700
2 Salary Expense 01 6111 40,000
Pension Expense 01 6131 2,400
Salary payable 5004 32,700
Income Tax 1101 4,000
Staff Advance 4203 1,200
Fines 1485 500
Pension Payable 5003 4,000

Unpaid Salary
Net salary amount is recorded as salary payable when salary expense is
recorded (see above). When salary is paid, salary payable is debited for the
amount paid. Any unpaid salary is the amount remaining in the salary
payable account code 5004 after salary is paid. When unpaid salary is
paid, the entry is a debit the salary payable code 5004 and a credit to
cash. After salary is paid, a subsidiary ledger for salary payable account
should be maintained. Each unpaid employee should be an account in the
subsidiary ledger.

Unearned Salary
Occasionally, salary is requested and received, but the employee is not
entitled to the entire salary amount received. For some reason, the
employee quits working for the public Body during the month. When this
happens, the salary entry explained above must be reversed for that
employee, and the pension transfer must be corrected. In addition,
MOFED must be notified so that the pension transfer and subsequent
month’s salary can be adjusted.

Example: Suppose an employee in the Ministry of Agriculture worked

only half of July instead of the whole month. This is discovered after the
salary expense entry in the example above. The amounts of overpayment
are:
Gross Salary 1000
Income tax 70
Pension expense - 6% 60
Salary Payable 890
Employee pension - 4% 40

Transaction #1: Reverse salary expense

Transaction Register of MOA:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Salary 01 6111 1000

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Department of Accounting and Finance Hawassa
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Expense
Pension 01 6131 60
Expense
Salary Payable 5004 890
Income Tax 1101 70
Pension 5003 100
Payable

Transaction #2: Adjust Pension transfer

Transaction Register of MOA:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Transfer - Salary 4001 100
Pension payable 5003 100

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Advance to 4210 100
pension
2 Transfer - 4001 100
Salary

Transaction #3: Next month's salary transfer

The Ministry of Agriculture (MOA) requests salary for the month of August
2001 with the following details:
Gross salary 38,000
Income tax 3,800
Pension expense - 6% 2,280
Deduction: salary advance 1,200
Employee pension - 4% 1,520
Net Salary payable 31,480

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 31,480 31,480
2 Transfer to PB 4001 3,800
Advance to 4210 100 3,700
Pension

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Transaction Register of MOA:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 35,280
Pension 5003 3,800 31,480
payable
2 Salary 01 6111 38,000
Expense
Pension 01 6131 2280
Expense
Salary 5004 31,480
payable
Income Tax 1101 3,800
Staff Advance 4203 1200
Pension 5003 3,800
Payable

3.6. Receivables and Payables

A receivable is an amount owed to a public Body that does not have terms
of repayment detailed in a signed agreement. Receivables usually are
created when:
 Cash is transferred but must be returned unless certain conditions
are met.
 Advances are given with the understanding that the amount must
be repaid or otherwise accounted for, or goods or services must be
delivered.

A payable is amount owed by a public body that is due within one year.
Payables usually are created when:
 Cash is received but must be returned unless certain conditions are
met.
 Goods or services are delivered but payment is not yet made.
Receivables and Payables: With MOFED
In some situations, MOFED advances cash to public Bodies. MOFED
records the advance as a receivable, and the public Body records the
advance as a payable. Cash movements between MOFED and a public
Body are recorded as a receivable and a payable, rather than a transfer, if
the funds were not requested by Ge/Be/We 11/xx. Advances must be
repaid to MOFED or otherwise accounted for.

Example Prior to receipt of its budget notification, a public Body

requests funds in June to pay recurrent expenditures. MOFED sends Birr
7,000
Transaction Register of MOFED:
No Description TB Account Others Cash at
Number bank
4105

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Dr Cr Dr Cr
1 Advance for 4206 7,000 7,000
Recurrent

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to 5024 7,000 7,000
MOFED

When the public Body receives its budget notification, a Ge/Be/We 11/2
is sent to MOFED for Birr 14,000. This requests includes the 7,000 Birr
received as an advance. MOFED approves the request, reduces the cash
transfer by 7,000 Birr, and transfers Birr 7,000 in cash.

Transaction Register of MOFED:

No Description TB Account Others Cash at
Number bank 4105
Dr Cr Dr Cr
1 Advance 4206 7,000
Recurrent
Transfer - 4002 14,000 7,000
Recurrent

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to MOFED 5024 7,000
Transfer - 4002 14,000 7,000
Recurrent

Receivables and Payables: with Employees

Three situations are described here:
 Long - term salary advances.
 Amounts due from employees as reimbursement for use of
government property.
 Handling of funds held by a public body on behalf of an employee

Receivables and payables: with Employees: Long - Term Salary

Advance
An employee can receive a long-term advance on salary (longer than one
month) under appropriate conditions. When a long-term salary advance is
processed, interest is charged and withheld from the advance. The public
body is responsible for payment of salary advances to its employees.

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Example: A long -term salary advance of Birr 2,000 is requested and
approved. MOFED transfers the net amount to the public body after
deducting the applicable interest on the advance amounting to Birr 200.

Transaction #1: cash transfer from MOFED

Transaction Register of MOFED:
No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer 4005 1,800 1,800

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer 4005 1,800 1,800

Transaction #2: Payment of Advance

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Staff 4203 2,000
Advance
Interest 1465 200 1,800

Receivables and Payables: With Employees: Reimbursed Payments

In certain circumstances, employees make personal use of government

property. When this occurs, the public body must charge the employee
and collect payment.

Example: A Public body receives a telephone bill for Birr 300. Included in
the bill are personal telephones calls made by an employee.

Treatment #1: The Public body knows at the time the telephone bill is
paid, that the amount of the personal telephone calls totals Birr 100.

Transaction Register of Public Body:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
When the telephone bill is
paid:
1 Telephone Expense 01 6258 200
Staff Advance 4203 100 300
When employee pays:
2 Staff Advance 4203 100 100

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Treatment #2: The public body does not know, at the time the telephone
bill is paid, the amount of the personal telephone calls.
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
When the telephone bill
is paid:
1 Telephone Expense 01 6258 300 300
When employee pays:
2 Telephone Expense 01 6258 100 100

Receivables and Payables: With Employees: Funds Held on

Employee's Behalf
In certain circumstances, funds are received by a public body and are
intended for the use of an employee. These funds are not budgeted by the
FGE. The public body is simply a conduit used for assigning the funds
from a donor to an employee. The public body should:
 Only handle funds that are used by the employee to further the
objectives of the public body, and
 Never give the employee access to other funds held in the same
bank account (do not allow the employee access to checks).

Movements of funds held by public bodies on behalf of an employee are

not recorded as revenue or expenditure for the government. The funds are
due to the employee while in the custody of the public body.

Example: A donor deposits Birr 3,000 in the bank account of a public

body to support the research of an employee.

Transaction #1: Funds are deposited

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to staff 5021 3,000 3,000

Transaction #2: The employee receives 550 Birr from the fund
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Due to staff 5021 550 550

Receivables and Payables: With Employees: Employee Transferred

with Salary Advance
Employees may be transferred from one public body to another; the
transferred employee may have a long-term salary advance with an
outstanding balance. The balance for the employee in the advance

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account must be transferred with the employee from the accounting
records of the former employer to the records of the new employer. The
document is a letter of transfer that details the balance in the employee’s
advance account. Each public body prepares a journal voucher based on
the letter.

Example: An employee is transferred from public Body #1 to public Body

#2. The employee has a long-term advance with an outstanding balance of
Birr 6,000.
Transaction Register of Public Body #1:
No Description T Account Others Cash at bank
B Number 4103
Dr Cr Dr Cr
Net Asset/Equity 5601 6,000
Advance to Staff 4203 6,000

Transaction Register of Public Body #2:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
Advance to Staff 4203 6000
Net Asset/Equity 5601 6,000

Receivables and Payables: With Suppliers

In the process of procurement, the payment of cash and the receipt of
goods and services do not occur simultaneously. When there is a timing
difference, a receivable or a payable is created.

Receivables and Payables: With Suppliers: Receivables from Suppliers

Receivables are created when a supplier is paid for goods or services prior
to their delivery. In this case, the supplier owes to the public body: Goods
and services equal to the cash provided, or Return of the cash.

Example: A public Body pays an advance of Birr 500 to a supplier for

procurement of office supplies. The supplier delivers the office supplies
after 30 days and the actual invoice amounts to Birr 2,500.

Transaction #1: payment of advance.

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Advance to - 4253 500 500
Supplier

Transaction #2: Delivery of supplies.

Transaction Register of Public Body:

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No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Office Supplies 01 6212 2,500
Advance to Supplier - 4253 500 2,000

Receivables and Payables: With Suppliers: Payables to suppliers

Payables are created when a supplier delivers goods or services prior to
receiving payment.
In this case, the public body owes to the supplier: Payment for the cost of
the goods and services, or Return of the goods.

Example: A public body receives office supplies amounting to Birr 2,500

on credit from a supplier. Payment is made after 30 days.
Transaction #1: Receipt of office supplies
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Office Supplies 01 6212 2,500
Sundry 5002 2,500
creditors

Transaction #2: Payment is made.

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Sundry - 5002 2,500 2,500
Creditors

Receivables and Payables: With Suppliers: Grace Period Payables

The first 30 days of the fiscal year are called the grace period. The
financial Law permits public Bodies to expend funds from their prior
year's recurrent and capital budgets during the grace period for goods and
services delivered before the end of the fiscal year. Amounts due to
suppliers on the last day of the fiscal year, that are paid during the grace
period from the prior year's budget, are called grace period payables
(account code 5001). Transfers of funds from MOFED to public Bodies,
that are used to pay grace period payables, are given account code 4007.

Example: In the first 30 days of the fiscal year, a public body pays Birr
12,000 for office supplies that were recorded as grace period payables
from the prior year's capital expenditure.

Transaction #1: Provision for grace period payables last year.

Last Year's Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4105

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Dr Cr Dr Cr
1 Office supplies 02 6212 12,000
Grace period 5001 12,000
payables

Transaction #2: Transfer of funds for grace period payables this year.
This year's Transaction Register MOFED:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer - - 4007 12,000 12,000
GPP

This year's Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer - - 4007 12,000 12,000
GPP

Transaction #3: Payment of grace period payables this year.

This year's Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Grace period 5001 12,000 12,000
payables

Receivables and Payables: with Regions

Occasionally, public Bodies make cash payments to regions. Payments to
the regions from the federal level are budgeted as part of the region's
subsidy. The public Body should record the payment as a subsidy
payment. A rare exception occurs when the funds are part of the approved
budget for the public Body and in this rare case, the item of expenditure
is part of the approved budget for the public body, the region is simply
action as a purchasing agent for the ministry. The responsibility for the
budgeted expenditure cash remains with the public body, although the
expenditure is executed in the regional since a settling of the funds is
expected, the transaction is recorded as a receivable by public body at
Federal level.

Example: The Ministry of Education (MOE) sends Birr 55,000 to Amhara

Regional Education Bureau (AREB). The Amhara Regional Education
Bureau returns invoices for the book totaling Birr 47,000 and cash
totaling Birr 8,000 to the Ministry of Education.

Transaction #1: Cash is sent to AREB

Transaction Register MoE:

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Department of Accounting and Finance Hawassa
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No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Advance to - 4208 55,000 55,000
region

Transaction #2: Cash and invoices are received from AREB.

Transaction Register of MOE:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Books 02 6215 47,000
Advance to 4208 55,000 8,000
region

Receivable and Payables: Deposits

Some public bodies collect and return deposits. Deposits are not
budgeted. The receipt and return of deposits may be documented using
special forms (Models 85 and 86 or Models 185 and 186). Deposits may be
kept in the safe, in the main bank account of the public body, or in a
separate bank account.

A deposit is a payable for a public body. A public body must return the
deposit upon demand of the depositor. A public body should not spend
deposit funds. When the deposit is returned, the payable is cancelled.

Receivable and Payables: Deposits: Receipt and Return of Deposit

Example: A public body collects a deposit of Birr 40,000 as bid security.
The bid is unsuccessful and the deposit is returned at a later date.

Transaction #1: Receipt of Deposit.

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Bid security - 5054 40,000 40,000
Deposit

Transaction #2: Refund of Deposit.

Transaction Register of Public Body:
No Description TB Account Other Cash at bank
Number 4103
Dr Cr Dr Cr
1 Bid Security - 5054 40,000 40,000
Deposit

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Receivables and payables: Deposits: Deposits kept in separate Bank

Account
If a bank account is maintained for deposits only, there is no need to keep
a transaction register for the bank account. A detailed record of each
deposit must be maintained, but the form of the record can be cashbook
with subsidiary records for each deposit.

Monthly, the cash balance in the cashbook must be reconciled with the
bank account's bank statement and with the detailed subsidiary records.
After reconciliation, the corrected deposit amount must equal the cash
balance in bank. This amount should be entered in the transaction
register of the public body as follows:
 The deposit account code should be debited and cash in bank 4103
credited for the current balance in the deposit account. After this
entry, the balance in the deposit account is zero.
 Cash in bank 4103 should be debited and the deposit account code
should be credited for the corrected deposit amount at the end of
the current month.

These should be the only accounting entries in the public body's

transaction register that involves the deposit account. No subsidiary
ledger is necessary; the detailed subsidiary records for the cashbook
services as the subsidiary ledger.

Example: The balance per the General Ledger in deposit account code
5051 is Birr 400,000. The deposit bank account is reconciled to the
detailed subsidiary records and the corrected balance is Birr 600,000

Transaction #1: Set deposit account balance to zero.

Transaction Register of Customs:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Customs - 5051 400,000 400,000
Deposit

Transaction #2: Record corrected deposit.

Transaction Register of the public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Customs - 5051 600,000 600,000
Deposit

3.7 Aid in Kind

Aid in kind is goods or services (such as technical assistance) provided to

a public body by donors. Aid in kind is received when goods are received
or services are rendered, and no payment is expected. Aid in kind

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represents two transactions simultaneously: the receipt of assistance and
the expenditure of assistance. Aid in kind should be budgeted and
recorded as both revenue and expenditure. The expenditure should be
recorded in the subsidiary ledger for the budgeted project, using the 4-
digit source of funding code assigned to the project.

Example: Assume aid in kind is received by a public body in which you

are working as an accountant in the form of a motor vehicle with a cost of
Birr 200,000 from USAID under the capital expenditure budget for project
code 2356.

Transaction Register of the public Body:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Motor 02 6311 200,000
vehicles
Assistance 2084 200,000

All aid in kind entries are recorded in local currency only.

3.8 Financial Document Transmittal Voucher: Me/He

Me/He is the document prepared as evidence for the transfer of financial

documents, such as expenditure vouchers, between responsible persons
in the accounting system.The purpose of the Financial Document
Transmittal Voucher is to record the transfer of financial documents from
one responsible party to another.

Preparation and Source Documents: Whoever is receiving financial

documents prepares the Financial Document Transmittal voucher.The
format of the Financial Document Transmittal voucher is shown in Figure
3.1

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Department of Accounting and Finance Hawassa University
Figure 3.1: Financial Document Transmittal Voucher
Model 42 Serial No.
Date
THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
MINISTRY OF FINANCE & ECONOMIC DEVELOPMENT
FINANCIAL DOCUMENT TRANSMITTAL VOUCHER
No Date Descripti Reference Reference Amount No. of Remar
on Type No Attachments k

Total
I have received the documents listed above from on the _____________days of the month
year and issued .

Transferred by: Name and Signature Received: Name and

Signature

Original -to-Transferor, second copy to Receiver

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3.9 Public Bodies who receive No Treasury Funds

Some public bodies receive no funds from treasury. Instead, their entire budget
is financed by revenue that they collect and retain. However, their reports may
be submitted quarterly rather than monthly.

3.10 Closing Entry

As discussed in Module two of this course, special routines are required at the
end of the fiscal year to maintain general and subsidiary ledgers. Specifically,
entries must be recorded in every general and subsidiary ledger at the end of
the year after the last monthly report is prepared and sent to MOFED. These
are called closing entries which must be recorded in every general and
subsidiary ledgers at the end of the year after the last monthly report is
prepared and sent to MOFED. These are called closing entries. Closing entries
also is required in MOFED's general and subsidiary ledgers after the annual
accounts are closed.

The purpose of closing entries is to set all temporary accounts in the general
ledger, and all related subsidiary accounts, to zero. Temporary accounts are:
 Revenue /Assistance/ Loan account codes 1000 - 3999.
 Transfer account codes 4000 - 4099.
 Expenditure account codes 6000 - 6999.

The procedures for making the closing entry are:

1. To prepare the last monthly report for the fiscal year and submit the
report to MOFED.      If the transfer was sent from MOFED during the
fiscal year, it should be recorded in      that fiscal year and not when the
cash is received.
2. After the last monthly report for the fiscal year is accepted by MOFED, to
record thefollowing entry in the transaction register of the bank account
from Me/He 27 trialbalance:

A. From the line from Revenue /Assistance / Loan:

 Record a debit in the transaction register for any amount that is a
credit on this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a
debit on this line in Me/He 27.
B. From the line for Recurrent Expenditure:
 Record a debit in the transaction register for any amount that is a
credit on this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a
debit on this line in Me/He 27.
C. From the line for capital expenditure:

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 Record a debit in the transaction register for any amount that is a

credit on this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a
debit on this line in Me/He 27.

D. From the line for Transfers:

 Record a debit in the transaction register for any amount that is a
credit on this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a
debit on this line in Me/He 27.
E. In net asset/equity account code 5601 records the appropriate amount
as a debit            or a credit to make the entry balance.
 To enter the amount for net asset/equity on the net asset/equity
account code 5601 ledger card in the general ledger; this account
should have no subsidiary ledger.
3. To remove from the general ledgers all general ledger cards for account
codes:
a. revenue/assistance/ loan account codes 1000 – 3999
b. transfer account codes 4000 – 6999
c. expenditure account codes 6000 - 6999
4. To remove all subsidiary ledger cards associated with account codes
a. Revenue/Assistance/ Loan account codes 1000 – 3999
b. Transfer account codes 4000 – 6999
c. Expenditure account codes 6000 – 6999
5. To store all general, subsidiary and budget ledger cards that are removed
in a file. The     file should be appropriately labeled as ledger cards for
the fiscal year.

A closing entry must be made in all general and subsidiary ledgers. If

there is an     internal bank account that maintains general and/or
subsidiary ledgers, the closing     entry is as follows:
 If the internal bank account is treated as a safe, no closing entry is
necessary.
 If the bank account holds deposits only, no closing entry is
necessary.
 If the bank account is for non - budgetary funds that are not
reported to MOFED, no closing entry is necessary.
 If a transaction register is maintained for the bank account, but
the transaction register is recorded in a general ledger (with
subsidiary ledgers) that is maintained by the public Body, no
closing entry is necessary.
 If the bank account is an accounting unit with its own general
and/or subsidiary ledger, a closing entry is necessary.
 If a monthly report is prepared and sent to the public body, follow
the instructions given above.

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 If a monthly report is not prepared, the amounts for the closing

entry (revenue/assistance/loan, Transfer, and expenditure) should
be taken calculated by totaling balances on the corresponding
general ledger cards. The closing entry should be the opposite of
the ledger card balance (if the ledger card balance is a debit, the
closing entry should be a credit; if the ledger card balance is a
credit, the closing entry should be a debit).
Each year must begin with a zero balance in all general and subsidiary
ledger cards for account codes:
 Revenue/Assistance/Loan account codes 1000 - 3999.
 Transfer account codes 4000 - 4099.
 Expenditure account codes carry forward from the end of the fiscal
year to the balances in all other account codes carry forward from
the end of one fiscal year to the beginning of the next fiscal year.

Example:Assume a Public body in which you are working as an accountant

prepares its final Me/He 27, which is the trial balance for the fiscal year. The
final report is accepted by MOFED.

The next hypothetical activity will give you a hint on how the final Me/He 27 is prepared in part.
Account Account Description Debit Credit
Code
-- Revenue/Assistance/Loan: 1,200,509
-- Expenditure:
-- Recurrent expenditure: 2,680,832
-- Capital Expenditure: 6,377,142
-- Transfers: 2,031,491, 9,703,216

Note that revenue/assistance/loan account balances typically are credits,

expenditure account balances are typically debits, but transfer account
balances can be debits or credits depending on the direction of the transfer.

Also during the period of preparation of closing entry, the following has to be
done by you.
Transaction Register of the public Body:
No Description TB Account Others Cash
Number at
bank
4103
Dr Cr Dr Cr
1 Closing Entry: --
Revenue/Assistance/Loan -- 1,200,509
Recurrent expenditure -- 2,680,832
Capital Expenditure -- 6,377,142
Transfers -- 9,703,216 2,013,491

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Net Assets/Equity 5601 167,740

You have to remove all ledger cards from its general and subsidiary ledgers
that have account codes 1000 - 3999, 4000 - 4099, and 6000 - 6999. The
cards are labeled and filed in storage. You have to record a debit of 167,740 in
net asset/equity ledger card account code 5601.

3.11 Beginning of Year Procedures

According to MOFED and DSA Project manual, December 2002, special

procedures are required: Before accounting for a new fiscal year can begin, and
immediately after the beginning of a new fiscal year.

These special procedures are:

 Opening new ledger cards,
 Recording cash and stock, and
 Procedures at MOFED.
These beginning of year procedures are described here.
Beginning of Year Procedures: Ledger Cards

A set of budget and general ledger cards should be prepared at the beginning of
each fiscal year.

Budget Ledger Cards

Budget ledger cards are valid only for the budget year to which they relate.
When budget notification is received, budget ledger cards should be prepared
for each item of expenditure for each budgetary Institution. The prior year's
budget ledger cards should be filed

General Ledger Cards

General ledger cards for the following account codes are closed at the end of
the fiscal year:
 Revenue/Assistance/Loan account codes 1000 – 3999
 Transfer account codes 4000 – 4099
 Expenditure account codes 6000 - 6999
Closing an account means:
 Setting the account's balance to zero, and
 Filing the account's ledger card'

Balances in all other accounts carry forward to the next fiscal year. However,
keeping the same ledger card may be awkward, since the number of cards
becomes bulky. The public body should begin a new fiscal year by preparing
new general ledger cards for all accounts that have carry forward balances. The
beginning balance (equal to last year's ending balance) should be recorded on

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each card. Last year's general ledger cards should be filed with the ledger cards
of accounts that were closed

Example: If a public Body request Birr 100,000 from MOFED. Then the
MOFED transfers only Birr 90,000 assuming that the public Body had Birr
10,000 as opening balance. At the same time, a recording is made as if the
ending cash balance was transferred back to MOFED as shown hereunder.

Transaction Register of MOFED:

Transaction Register of the Public Body:
No. Description TB Account Other Cash at
Number Bank 4105
Dr Cr Dr
1. Cash transfer - 4002 90,000
Non- Cash - 4052 10,000
transfer
Non- Cash - 4055 10,000 90,000
transfer

Transaction Register of the Public Body:

No. Description TB Account Other
Number
Dr Cr Dr
1. Non-Cash transfer - 4055 10,000
Non- Cash - 4052 10,000
transfer
Cash transfer - 4002 90,000 90,000
Subsidiary Ledger Cards
Subsidiary ledger cards for closed general ledger accounts should be filed with
the general ledger cards. Subsidiary ledger accounts and related general ledger
accounts also are considered closed. Balances in all other subsidiary accounts
carry forward to the next fiscal year. Unless the number of cards for a
particular subsidiary account becomes bulky, last year's cards can continue to
be used in the following year. If the public body chooses to begin a new fiscal
year by preparing new subsidiary ledger cards, the balance for each subsidiary
account carries forward. The beginning balance (equal to last year's ending
balance) should be recorded on each card. Any subsidiary ledger cards that are
replaced should be filed with the ledger cards of accounts that were closed.

Beginning of Year Procedures Opening Balances

After the last day of the fiscal year, the cash and stock balances at public
Bodies are sealed until Inspectors can verify the balances. MOFED applies the
cash and stock balances against the future requests, as indicated on
Ge/Be/We 11/2 or Ge/Be/we 11/3.

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Cash Opening Balances

The ending balance in cash in safe and cash in bank at a public body must be
transferred to MOFED at the end of the fiscal year. However, the public body
needs cash transferred to it for the new fiscal year. Rather than moving cash
back and forth, the transfers are handled as non-cash transfers. MOFED
deducts the opening balance of cash in safe and cash in bank from the amount
of budgeted cash to be transferred to the public body. This deduction is made
on Ge/Be/We 11/2 or Ge/Be/We 11/3 and is handled as a non-cash transfer
by MOFED and by the public Body. At the same time, a recording is made as if
the ending cash balance was transferred back to MOFED.

Example: Assume a public Body requests Birr 200,000 from MOFED. MOFED
transfers Birr 190,000 because the public Body has Birr 10,000 as opening
balances.

Transaction Register of MOFED:

No Description TB Account Others Cash at
Number bank 4105
Dr Cr Dr Cr
1 Cash - 4002 190,000
transfer
Non-cash - 4052 10,000
transfer
Non-cash - 4055 10,000 190,000
transfer

Transaction Register of the public Body:

No Description TB Accou Others Cash at
nt bank 4103
Numbe
r
Dr Cr Dr Cr
1 Non-cash - 4055 10,000
transfer
Non-cash - 4052 10,00
transfer 0
Cash transfer 4002 190,0 190,
00 000

Stock Opening Balances

The ending balance in stock at a public body is charged as reduction to the
next year's budget. The reduction is treated as a non-cash transfer and as a
reduction to the amount of cash that can be requested and committed for a
particular budgeted item.

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Department of Accounting and Finance Hawassa University

The amount of the ending stock also should be recorded in the transaction
register at MOFED as a debit to non-cash transfer for recurrent expenditure
account code 4052 and a credit to other non-cash transfers account code
4055. In its Transaction Register, the public Body records a debit to other non-
cash transfers account code 4055 and a credit to not - cash transfer for
recurrent expenditure account code 4052.

Example: Assume inspectors report Birr 145,000 in stock remaining at a

Public Body at the end of the year. A Public Body requests Birr 200,000 from
MOFED. MOFED transfers Birr 55,000 because the public Body has Birr
145,000 as opening stock balance. And also further assume that you are an
accountant of both MOFED and the public body.

Transaction Register of MOFED

N Description TB Account Others Cash at
o Number bank 4105
Dr Cr Dr Cr
1 Cash transfer - 4002 55,00
Non - cash - 4052 145,0
transfer 00
Non - cash - 4055 145,0 55,00
transfer 00 0

Transaction Register of Public Body:

N Description TB Account Others Cash at
o Number bank 4103
Dr Cr Dr Cr
1 Non - cash - 4055 145,000
transfer
Non - cash - 4052 145,00
transfer 0
Cash transfer - 4002 55,00 55,00
0

In the appropriate stock item's budget ledger card, in the "payment receive"
and "commitment" columns, Birr 145,000 is recorded.

Beginning of Year Procedures at MOFED

In here also, special Procedures are required at MOFED before the accounting
for a new fiscal year can begin. These special procedures include updating for
changes to: the budget, budget codes and account codes. In particular, MEFED
must input or update in the budget/disbursement/accounts program:
1. Budget identification codes for all public Bodies.
2. Budget identification codes for all reporting Entities.
3. The Chart of Accounts for any changes to:

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Department of Accounting and Finance Hawassa University

Item of Expenditure
Items of Revenue
Transfers
Assets
Liabilities
4. Annual appropriated budget.

2.12 Cashier Functions

Cashier Functions: Cash Withdrawn from Bank to Safe

The accountant writes a check to the cashier to put cash in the transaction
register and the cashier records the bank payment voucher in the petty
cashbook as a debit to cash.

Example: A check for Birr 3,000 is written to the cashier for petty cash.

Transaction Register of public Body:

No Description T Accou Cash at Cash in
B nt bank 4103 safe 4101
Numbe
r
Dr Cr Dr Cr
1 Cash withdrawn - - 3,000 3,000
from safe

Cashier Functions: Cash deposited in to bank from the safe

The cashier transfers cash from the safe to the bank by depositing the cash in
the bank. The cashier brings the bank deposit slip to the accountant who
prepares a receipt voucher. The accountant records the receipt voucher in the
transaction register and the cashier records the receipt voucher in the receipt
cashbook as a credit to cash.

Example: The Cashier deposits Birr 20,000 in the bank.

Transaction Register of Public Body:
N Description T Accou Cash in Cash at
o B nt Safe 4101 bank 4103
Numbe
r
Dr Cr Dr Cr
1 Cash deposited in to - - 20,000 20,000 Cashier
bank
Functions: Cash and Check Receipts by Cashier
When a cashier receives currency of checks, a receipt voucher is issued. The
cashier records the receipt voucher in the receipt cashbook as a receipt of
cash. At the end of the day, the cashier deposits the cash and checks in the

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Department of Accounting and Finance Hawassa University

bank and brings all receipt vouchers and the bank deposit slip to the
accountant. The accountant issues a receipt voucher to the Cahier. The
accountant records each receipt voucher in the transaction register and the
cashier records the receipt voucher from the accountant in the receipt
cashbook.

Example: Assume that a Cashier receives a total of Birr 2,000 on the same
day. Birr 1,000 in cash is a return of an advance by a staff member, and Birr
1,000 in check is a court deposit. The Cashier records the receipts in the
Receipts Cash Book and deposits the Birr 2,000 in the bank at the end of the
day. The bank deposit slip and Receipt Vouchers are provided to the
Accountant. The Accountant issues a Receipt Voucher to the Cashier.

Transaction Register of Public Body

No Description TB Accou Others Cash at Cash in Safe
nt bank 4101
Numbe 4103
r
Dr Cr Dr Cr Dr Cr
1 Staff Advance - 4203 1,000 1,000
2 Deposit - 5052 1,000 1,000
3 Cash 2,00 2,00
deposited in to 0 0
bank

Cashier Functions: Cash Imprest Payments to Cashier by Accountant

Each public body should establish the amount of cash to hold in petty cash.
The cashier makes cash payment from the impress fund using cash payment
vouchers. When the petty cash balance is low, the cashier submits the cash
payment vouchers to the accountant. The accountant writes a check to the
cashier for the payment vouchers to the Accountant. The Accountant writes a
check to the cashier for the total amount of the cash payment voucher. The
accountant records each cash document for the check is bank payment
voucher in the transaction register. The cashier records the bank payment
voucher from the accountant in the petty cash book as a debit to cash.

Example: The Accountant pays the cashier Birr 4,000 by check using a bank
payment voucher to replenish the petty cash from a cash payment voucher
from the cashier for Birr 4,000 paid to an employee for per diem. The cashier
records the receipt in the petty Cashbook. The accountant records the cash
and bank payment vouchers in the transaction register as follows:

Transaction Register of Public Body:

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Department of Accounting and Finance Hawassa University

No Description TB Accou Others Cash at Cash in

nt bank 4103 Safe 4101
Numbe
r
Dr Cr Dr Cr Dr Cr
1 Per Diem 01 6231 4,000 4,00
0
2 Cash to 4,000 4,00
Cashier 0

FGE Accounting Chapter Three note Page 38